The Impact of the South Asia Countries Ecological Footprint and Globalization on Their Financial Stability

Abstract

Purpose: the purpose of this research is to study the impact of ecological footprint, globalization, C02 emissions, GDP per capita, FDI and government effectiveness on financial stability of South Asian countries. Design/ Methodology: Research was conducted using panel data for four selected countries of South Asia i.e. Pakistan, India, Nepal and Bangladesh covering period 2000-2020. Z-score was used as a measure of financial stability of these countries. Levin Lin-Chu, HarrisTzavalis, Breitung, and Hadir unit tests were employed to determine the stationary of data. According to these the data found to stationary at first difference. Correlation matrix, Panel ARDL regressions, MG and DFE regressions were conducted. CSD test revealed cross sectional dependency among countries. Findings: the overall findings of South Asian countries revealed positive impact of ecological footprints, globalization, FDI, GDP per Capita and government effectiveness on financial stability. Whereas negative impact of C02 emissions on financial stability was determined. The country wise analysis revealed that Pakistan has positive and significant impact of C02 emissions and globalization on financial stability of country whereas negative and significant impact of government effectiveness and FDI was observed on financial stability. Bangladesh also revealed positive and significant impact of C02 emission on financial stability. The findings revealed that India has negative and significant impact of C02 emission and government whereas positive impact of FDI on financial stability. GDP per capita and FDI positively and significantly impact financial stability of Nepal. Implications: this study has theoretical implication of Kuznets curve hypothesis and halohaven hypothesis. This also has policy impactions for governments and policy makers to reduce the negative impacts of ecological footprints and carbon dioxide emissions. Similarly policies and government actions can be beneficial to enhance FDI and globalization.